Breaking free from the chains of the past Where
truth moves faster than a Holstein calf No law
waiting on some printed page We're charting new
ground in the digital age From genomic codes
to robot facts We cut through the noise, no hold
them back not your daddy's dairy news tonight
we're sparking Welcome to the Bullvine Podcast,
where we challenge everything you think you know
about dairy farming. And if you're looking for
the same old industry talking points, you're
in the wrong place. Today, we're diving into
a story that has the entire dairy industry buzzing.
A Wisconsin farm just proved that cutting 200
cows actually increased their profits by $1 .2
million annually. Yeah, you heard that right.
Less cows, more money. While 72 % of megadairies
are hemorrhaging cash -chasing expansion, John
DeFarm in Baldwin, Wisconsin, took the opposite
approach. And their contrarian strategy is making
industry consultants extremely uncomfortable.
So buckle up, because what you're about to hear
challenges every sacred cow in dairy farming.
And trust me, by the end of this episode, you'll
be running your own numbers. Let's dive in. Welcome
back to The Deep Dive, where we cut through dairy
industry noise to get you the insights that actually
matter for your operation. We are focused today
on a story out of Baldwin, Wisconsin, that is
completely upending the biggest sacred cow in
dairy, the relentless pursuit of scale. And today,
yeah, we're diving deep into a feature piece
that's been generating some serious buzz across
the upper Midwest. This one's got layers and
some genuine surprises, frankly. It's really
going to make farmers rethink how they've been
approaching expansion. I mean, the entire premise
challenges that fundamental assumption that you
always have to get bigger to justify those large,
multimillion -dollar capital investments. Okay,
let's unpack this immediately because the core
event here is, well, it's very revolutionary.
We are talking about John DeFarm, a fifth -generation
operation. The farmer, Michaela McGee, she successfully
pitched her lender, Compeer Financial, on a radical
plan. Get this. She would reduce the herd by
200 cows. That's a, what, 13 % reduction, while
simultaneously securing a multimillion -dollar
loan to invest in new high -tech infrastructure,
specifically a big 60 -stall rotary parlor. And,
you know, this is just some interesting anecdote
for small farms. Not at all. This is a crucial
playbook for basically everyone feeling the squeeze
of input costs right now. We're sitting here
mid 2025. Feed costs are all over the place.
Capital is expensive and labor. Labor is, frankly,
almost impossible to secure and keep hold of.
What John DeFarm achieves suggests potential
seven figure changes to your net profit. And
that's based purely on optimization. you know,
on getting better, not just getting bigger. That's
why we really need to spend some serious time
digging into this. Right. And here's where it
gets really interesting. Frankly, it completely
flips the last, what, two decades of lending
philosophy on its head. Compure Financial approved
a major multimillion dollar loan because John
DeFarm was shrinking the herd. My immediate thought
is how do you even pitch that to a banker? You
know, historically, they demand growth. They
want to dilute the per cow cost of new debt.
This right sizing model, it signals that the
lending community is maybe finally realizing
that a smaller, optimized operation with high
margins is actually a far safer, better bet than
an an overextended mega dairy just chasing volume,
you know, at the expense of efficiency. That
is the pivotal shift. Absolutely. The industry
has sort of conditioned us all to believe that
the only way to pay for a new parlor or a new
freestall barn or whatever is to add 500 cows
to dilute that capital cost per head. John DeFarm
essentially proved, and they used their own audited
numbers to do it, that the cost of carrying the
inefficiency. The elevated labor required by
those marginal cows was actually higher than
the annual debt service cost of the new parlor.
Think about that. They paid for the debt through
efficiency games, not just more volume. That
is the crucial lesson we really have to unpack
here. Okay, so let's take that concept, that
always busy, always stressed idea, and break
down what Michaela actually found when she first
came back to the family farm. This was 12 years
ago, right? Looting up to this big transformation.
Yeah, what she walked into was, well, you'd call
it a successful operation, but one that was deeply
strained. It was a textbook example of that upper
Midwest dairy pressure cooker scenario. They
were milking 1 ,550 cows using two older herringbone
parlors. And crucially, like you said, they were
running those parlors 24 hours a day, seven days
a week, relied on over 30 employees. The source
material nails it, calls it constant firefighting
and just stress. Constant firefighting. Yeah,
that's the feeling every producer knows, right?
You're always busy, but are you busy being efficient
or are you just busy reacting to the next crisis?
The fact that they were running 24 -7 tells me
they had absolutely zero tolerance for error
or maintenance or staff issues. Zero tolerance,
exactly. A 24 -7 schedule means you have no scheduled
maintenance downtime, period. So you're patching
problems instead of really fixing them. And that
inevitably leads to deferred maintenance on the
parlor equipment. Right. Which then maybe slightly
decreases throughput efficiency, which then demands
more labor hours just to stay on schedule. It
just becomes this grinding, exhausting cycle.
It leads to burnout, you know, for the owners,
for the staff, everyone. And Michaela realized
this, this major calculation gap, because she
had that outside perspective. She toured other
dairies. She wasn't sort of buried in the day
-to -day chaos like the rest of her family probably
was. She saw the core inefficiency. She really
nailed it with a simple quote. We had a lot of
inputs for really not milking that many cows.
Now, what does a lot of inputs actually translate
to on the farm? It means that those last 200
cows, those marginal producers, they were requiring
disproportionate labor, feed, and management
time relative to the actual milk they were contributing.
They were essentially net labor sinks, beating
up resources. Okay, I have to pause here because
for the farmer listening who might be pushing
a 1 ,000 cow or maybe a 500 cow operation and
feels that same nagging labor pressure, What
does that inefficiency look like on paper? How
do you even calculate that marginal cow cost?
Well, you have to look hard at your cost of production
per hundredweight, your hundredweight. Let's
say your overall herd average is 85 pounds, okay?
But if your marginal cows are dragging that down,
and maybe more importantly, if their mere presence
forces you into an extra shift of labor or stops
you from scheduling that preventative maintenance,
you're losing money right there. If those 200
cows didn't contribute enough actual milk volume
to cover the cost of the extra parlor shift needed
to milk them, then, well, they were operating
at a loss. Simple as that. Michaela saw that
the solution wasn't just milking more cows. It
was removing the cows that demanded the most
resources for the smallest return. So the goal
became finding that point, that tipping point
where complexity and just sheer chaos start eating
up the marginal profit, finding their optimal
efficiency threshold, basically. Yeah. And, you
know, it's easy for us to sit here and talk about
optimization. But imagine bringing this idea
to a fifth generation dairy family. Their whole
life philosophy has probably been growth equals
safety. That's deeply ingrained, isn't it? Expansion
is how we pay for things. So Michaela, she faced
a huge cultural hurdle, just building consensus
around reducing cow numbers. I'm naturally a
bit skeptical here. I mean, I imagine that conversation
was probably pretty contentious. Who was the
biggest hurdle? Was it her father, who'd been
running the operation successfully for decades?
Or maybe the consultants, you know, they're usually
paid to tell you how to maximize throughput.
Well, interestingly, Michaela credited her grandpa's
analytical mind as being really key. So the younger
generation. Brought the insight, maybe. But the
older generation provided that rigorous financial
modeling. They didn't just guess that $3 ,350
was some magic number. No, they used previous
year's detailed financial reports, all the P
&Ls, the labor logs, everything, to create a
mock -up. They compared labor costs, feed costs,
milk income, debt service, across multiple scenarios.
What if we cut $100? What if we cut $200? That
is the modeling process that should be mandatory
before any large capital investment, really.
They used hard data to figure out that the optimal
number was 3 ,350 cows. That 200 -cow gap that
represented the inefficiency buffer they needed
to basically carve out. And that leads directly
to the, frankly, brilliant terminology introduced
by their CFO, Chris Van Someren. Right -sizing.
We really have to stop calling this downsizing
because that word implies failure, doesn't it?
Or like you're retreating because of market pressure.
Right -sizing, though, it's... actively optimizing
for peak efficiency and maximum margin. It's
framed as a strategic move forward, not a retreat.
Oh, I love that psychological framing. It completely
shifts the discussion from survival to optimization,
doesn't it? And it aligns perfectly with the
foundational philosophy Michaela's father had
apparently instilled. Be the best, whatever size
you are, Derry. That mantra is a direct contrast,
the total opposite of that dated philosophy that
says expansion is the only way to pay for big
capital investments. It really proves that you
can pay for a multi -million dollar parlor. through
generated efficiencies and just superior margins.
Rather than simply taking on more volume and
diluting your average efficiency, when you look
at labor costs today, I mean, especially in that
$18 to $20 per hour range, maybe even higher
in some places, volume simply cannot cover sloppy
management anymore. It just can't. The focus
has to shift to management perfection, getting
the most out of what you have. Okay, let's follow
the money then, because this is the section that
really validates the whole concept, right? What
was the immediate financial impact of putting
this right -sizing model into practice, even
before the new parlor was up and running? The
results were, well, pretty immediate and, frankly,
astounding. Within just 18 months of shrinking
the herd by those 200 cows, John DeFarm was shipping
nearly the same amount of milk. They maintained
their 35 million pounds annually. Just think
about that for a second. They kept their herd
by 13%, but kept 100 % of their total milk volume.
Wait, hold on. How is that physically possible?
That implies... Either those 200 cows they culled
were just drastically underperforming the herd
average or the remaining cows improved their
performance dramatically. It's probably a combination
of both, yeah. But primarily it was due to health
and efficiency gains. By culling that bottom
10 to 13 percent of the herd, they removed...
The animals that were dragging down the average,
obviously. The ripple effects are critical here.
Somatic cell count dropped by a massive 38%.
That's huge. Overall, herd health improved. Management
became more flexible because there was just less
stress on the facilities, less crowding maybe.
Wow, that 38 % drop in SEC alone is a massive
financial win, isn't it? Far beyond just the
quality premiums. We're talking reduced vet costs.
probably lower antibiotic use, maybe improved
longevity for the remaining herd. How did that
translate into the hard dollar figures we heard
about, that big number? Yeah, the bottom line
validates everything. The net profit gain from
shrinking was $1 .2 million annually. That's
a 34 % margin improvement. And we can logically
trace where this money came from. A huge chunk,
which we'll detail in a minute, came from labor
savings. Just massive. The rest came from feed
savings, those reduced health care costs, and
yeah, those higher quality premiums driven by
the 38 % SEC drop. They basically monetized the
removal of chaos. And this is the data that speaks
volumes to the lenders, right? The source material
claims that operations that shrink and optimize
generate 47 % better debt coverage ratios. So
the banks are no longer just prioritizing raw
volume. They're prioritizing stability and margin.
Makes sense. Absolutely. And that's what explains
the whole banking revelation, the approval for
that $3 .2 million Rotary Parlor loan. The source
claims that 72 % of 1 ,500 -plus cow dairies
hemorrhaged money in 2024 chasing growth. That
number, it's highly provocative. We need to kind
of unpack what that might mean. Yeah, I'm definitely
skeptical of such a sweeping number like 72 percent.
But let's just assume for a second it's directionally
accurate. OK, if nearly three quarters of large
dairies struggled, what specifically caused that
hemorrhaging? Was it just milk rice fluctuation
or was it the cost of that inefficiency, the
very thing John DeFarm eliminated? It's almost
certainly the latter. primarily driven by labor
and feed costs. When you're over leveraged and
you're trying to chase growth, you often end
up managing inefficiently. You cut corners where
you shouldn't. That 72 % struggle rate, maybe
it's a warning sign that the old model borrowing
heavily to expand into higher input costs has
kind of broken down. Lenders see John DeFarm's
success, right? their robust $1 .2 million profit
margin, their improved debt coverage ratio, and
they realize that an optimized stable operation
is dramatically safer than a sprawling, maybe
poorly managed one, regardless of the total cow
count. They're essentially betting on management
capability over sheer size now. So the loan wasn't
approved despite the shrinkage. It was actually
approved because of it. The shrinkage proved
Michaela's competence. It showed she could identify
and eliminate inefficiency, which actually made
her a better credit risk. Yeah, exactly. And
that financial stability gave them the confidence
to make the next big move, the investment in
the new infrastructure. They pushed hard for
a massive 60 -stall rotary parlor, even when
consultants initially recommended a smaller 40
-stall model for their optimized herd size of
30 to 150 cows. Why the deliberate oversizing,
then? Usually, consultants push for maximum throughput
for the investment dollar, don't they? Michaela
went against that typical recommendation, and
I assume the cost difference between a 40 stall
and a 60 stall is pretty significant. Oh, it
is significant, yeah. But Michaela defined that
extra capacity not as headroom for future expansion,
which is the old way of thinking. Instead, she
saw it as headroom for operational resilience.
She learned the value of having downtime during
that initial right -sizing transition. She advocated
for the extra capacity specifically to ensure
flexibility. Okay, that's a crucial paradigm
shift right there. She specifically said that
having extra time for maintenance, cleaning,
and scheduling is well worth the cost to me.
That means the parlor is not the bottleneck anymore.
It's actually a buffer. It protects the entire
farm schedule from the unexpected. You know,
a staff member calling out sick or a minor mechanical
failure. Exactly right. The initial chaos forced
them to run 247. But now... With the 60 stall
rotary, they can milk those their 1 ,350 cows
efficiently in much less time. That creates these
large blocks of scheduled downtime every single
day. And that downtime is invaluable for preventative
maintenance, for de -cleaning, maybe most importantly
for staff quality of life. Okay, let's break
down the staggering labor math because this is
where that $1 .2 million profit really starts
to... Makes sense. It gets justified. Before
the rotary, using those two herringbone parlors
24 -7, what was the daily milking labor requirement
again? Before, they were clocking 144 hours of
labor daily just for milking. That requires multiple
shifts, constant management oversight, and often
leads to high turnover because, let's face it,
the hours are brutal. With the 60 -stall rotary,
they dropped that daily requirement down to just
18 hours. 144 down to 18? That is... That's truly
seismic. We need to spend a moment on the impact
of that reduction. What does that mean for their
annual savings calculation? It's exponential,
really. We're talking about eliminating 126 hours
of labor per day. Every single day. Annually,
that equates to 45 ,990 fewer labor hours that
they have to schedule, manage, train, pay benefits
for. You name it. Okay, let's put a conservative
dollar figure on that. If we assume an all -in
cost of labor wages, benefits, payroll tax, management
overhead, let's say $18 to $20 per hour, which
might even be low these days, that 45 ,990 -hour
reduction translates into savings of nearly $900
,000 annually, almost a million dollars saved,
purely by optimizing the milking process. That's
exactly why the $3 .2 million parlor isn't nearly
as daunting as it sounds up front. They essentially
found close to a million dollars a year in efficiencies
before the milk revenue even hits the balance
sheet. They paid for the new infrastructure not
by adding more risk, like more cows and more
debt, but by eliminating existing waste. This
math, this is the new blueprint for dairy investment,
I think. So that $1 .2 million profit increase
we talked about, it's almost entirely driven
by that massive reduction in operational chaos
and labor hours. Plus those ancillary benefits
from the improved health metrics like SEC. But,
you know, the story doesn't end with just the
math. What truly makes John DeFarm a blueprint
for others, I think, is how they leverage those
cost savings to actually invest in their people.
They turned cost cutting into a massive competitive
advantage in labor retention. Absolutely. We've
definitely reached a point in agriculture, haven't
we, where finding good, reliable people is often
harder than maintaining butterfat averages in
July heat. Employee satisfaction isn't just a
nice -to -have anymore. It's a direct competitive
advantage and a profit driver. John DeFarm basically
created a workplace where people want to be.
And the results really speak for themselves.
They achieved a 65 % better retention rate. after
making these changes. That's huge. We're talking
about massive quality of life improvements. Instead
of those brutal, frankly, mind -numbing eight
-hour milking shifts that defined the 2007 world,
they introduced standardized five -hour shifts.
Five -hour shifts. Yeah, that makes a massive
difference for family life, for burnout, just
overall engagement, right? Yeah. What other tactical
changes did they make to improve the culture
there? Well, they implemented cross -training
too. So employees might milk in the morning and
then spend the afternoon feeding calves or helping
with herd movement, something different. It breaks
up the monotony, makes the staff feel more versatile,
more engaged. Plus, the flexible scheduling that
the extra rotary capacity allowed meant they
could accommodate family needs sometimes, rather
than demanding staff adhere rigidly to that unforgiving
24 -7 cycle. And then there's that fantastic
anecdote about the culture transformation, the
kitchen. Michaela built a small kitchen area
right above the rotary parlor where she cooks
home -cooked lunches for employee meetings. She
views cooking as her love language, she says,
that makes meetings feel family -style and takes
the edge off. That's great. You know, that gesture
is invaluable. It really is. It's an investment
in the culture. It proves that she values them
beyond just their sheer labor output. Michaela
quoted some research, apparently, that a person's
boss or co -workers have just as much influence
on their day as their spouse does. That's powerful.
By making meetings feel more like family meals,
she's directly reducing the stress load of the
job. You can maybe pay $2 more an hour, sure.
Or you can create a place where people genuinely
feel valued and calm. The latter. That creates
sustainable retention. It really seems like that
massive infrastructure investment wasn't just
about cows at the end of the day. It was ultimately
about making the jobs of the people who manage
those cows more humane, more sustainable. Precisely.
And the ultimate marker of success, I think,
is that sound of success anecdote. Michaela observed
that the farm became so quiet in a good way after
the changes that some longtime employees were
actually concerned. They felt like they were
forgetting something because that constant frantic
sense of crisis was simply gone. Huh. That is
the sound of a proactive system, isn't it? Not
a reactive one. When chaos is the norm, the lack
of chaos feels wrong. By eliminating the necessity
of 247 firefighting, they gave their management
and their staff the mental space to actually
focus on optimization and care rather than just
survival. That's a competitive edge you really
can't put a price tag on. And John DeFarm isn't
stopping at the parlor either. Their next move
is continuing to take control of their inputs.
They're taking on their own cropping operation
now, which was previously handled by custom operators.
That makes perfect strategic sense, fitting with
this whole resilience philosophy, doesn't it?
When your two biggest expenses are labor and
feed, controlling your own crop production increases
self -sufficiency. It buffers you from those
volatile commodity markets. They're internalizing
core costs to minimize external risk. Smart.
Everything they seem to do now is viewed through
that lens of optimization, not just expansion
for expansion's sake. Their long -term plans,
building a new freestyle for pregnant halfers,
maybe relocating eventually because of urban
encroachment, it all seems to fit this mold.
The goal appears to be perfection within their
means, not just scale. This focus, this is what
we need to champion across the industry, I believe.
Michaela's concluding, quote, yeah, it really
should be a required reading for every dairy
operator. She said, why add more to your plan?
I challenge any dairy operator listening right
now. Apply that same critical standard to your
own current goals. Are you chasing more work
just to justify debt, or are you genuinely striving
for perfection in your current footprint first?
The synthesis here is pretty clear, I think.
John DeFarm provides a functional blueprint for
the modern dairy. The industry has definitely
reached an inflection point where that old expansion
model is just becoming unsustainable with high
labor costs and feed volatility. Optimization
is the new scale. The fact that maybe 72 % of
large dairies struggle chasing growth, that just
confirms the danger of ignoring efficiency for
volume. John to prove that a strategic shrinkage
can actually net profit where desperate expansion
might cause losses. And if the model works for
a 1 ,550 cow operation, it absolutely applies
down the line, right? To a 500 cow or a 700 cow
operation struggling with that same labor or
input pressure. It's about finding your efficiency
sweet spot. All right. It was a lot of data and
a really deep dive into the philosophy behind
this. So our farmer just finished morning milking.
Maybe they're driving to the feed store right
now. What are the three most actionable takeaways
they need to implement or at least think about
from this discussion? Three things. First, the
immediate action you need to take maybe this
week. Run the threshold check. You need to calculate
your current labor cost per hundred weight of
milk. If you are spending more than $1 .47 per
hundredweight on labor, and look, this is a tight
benchmark, but it reflects today's reality of
20 -hour labor costs, or if you're running more
than 20 total hours of daily labor just for milking.
The data from John Day strongly suggests you
are leaving potentially $500 ,000 or more in
profit on the table annually. Find your operational
efficiency score to maybe annual profit divided
by total cows, and compare your marginal cows
to your average performance. Know your numbers.
Yeah, to put that $1 .57 cent in context, historically,
maybe we tolerated labor costs closer to $1 .20
or even $1 .30 rate. But the reality of rising
wages, diminishing staff availability, it means
that threshold has tightened significantly. If
you're above $1 .50, you likely have a critical
efficiency problem that just adding more volume
probably won't solve. Exactly. Okay, second thing.
Medium -term strategies say over the next three
to six months, you need to engage in some rigorous
financial modeling. Do exactly what John DeFarm
did. Take your previous detailed financial reports,
your actual numbers, not wishful thinking, and
create a mock -up. Show the impact of a targeted
10 -15 % herd reduction. Focus specifically on
culling the bottom 10 % based on lactation performance,
health history, whatever metrics you track. Then,
track the projected changes. What happens to
labor costs? Feed costs? How does that impact
your projected net milk income? And at the same
time, look for areas for greater self -sufficiency.
Can you bring dry cow management in -house? Cropping
operations? Reduce that external cost exposure.
So basically, you are running a real -life simulation
using your own historical data to see if the
reduction in expenses actually outweighs any
potential reduction in volume. That's the only
way you can realistically pitch this to your
own family or your partners or definitely your
lender. You need the numbers. Exactly. And finally,
the long -term positioning. Thinking one to two
years out. Invest in resilience in people. Adopt
this right -sizing philosophy. When you are planning
major capital improvements like a new parlor
or barn, you absolutely must prioritize flexibility
and resilience. That means building in scheduled
downtime. Don't just maximize immediate cow throughput.
Remember that nearly $900 ,000 in labor savings
at John D. was also effectively an investment
in achieving 65 % better employee retention.
Your infrastructure has to support your people,
not just your cows. Because satisfied, stable
employees are arguably your single largest competitive
advantage today. That capacity for downtime and
maintenance, it's like an insurance policy against
operational chaos, isn't it? It really is. Absolutely.
This has been another deep dive from the Deep
Dive. If this kind of analysis helps your operation,
head to our website for more articles that tell
you what's really happening in dairy. And seriously,
subscribe wherever you get your podcasts. We're
releasing Deep Dives twice weekly now. And trust
me, you don't want to miss what we've got coming
next week. We're talking about the true impact
of synthetic milk alternatives on Class IV -V
pricing models. Class IVb milk, generally used
for things like butter and powdered milk. We
are going to break down how these new alternatives
are specifically targeting and disrupting those
commodity markets and what that really means
for your bottom line. It's going to be interesting.
All right. That's a wrap on today's episode of
the Bullvine Podcast. Look, I know some of you
are sitting there thinking this right -sizing
approach sounds too good to be true. But here's
the thing. John DeFarm's numbers don't lie. Same
milk production. $900 ,000 less in labor costs,
and employees who actually want to show up to
work. If you're ready to challenge the expansion
at all costs mentality, head over to thebullvine
.com for the complete breakdown, including the
exact financial models and implementation timeline.
We've got the data, the metrics, and the step
-by -step roadmap. And hey, if you think I'm
wrong about this, I want to hear from you. Drop
us a comment, send us your numbers, prove me
wrong. That's how this industry gets better,
through real debate, not polite agreement. Remember,
The Bullvine isn't here to make you comfortable.
We're here to make you profitable. Until next
time, keep questioning conventional wisdom, keep
pushing boundaries, and keep making dairy farming
better. Thanks for listening to The Bullvine
Podcast. We'll see you next time. Thank you.